Written evidence submitted by National Grid Electricity System Operator (HCC0021)

Introduction

National Grid Electricity System Operator (ESO) is responsible for the real time balancing of electricity on the GB electricity network.
Alongside this, the ESO plays a leading role in the development of the future GB network. Our Future Energy Scenarios and Network Options Assessment work together to ensure network investments are made to support technology and capacity needs, whilst providing value for money to consumers.
We use our unique position, at the heart of the GB electricity network, to consider how energy use may change in the future and how the capability of the GB electricity network will need to adapt to meet these changes.

Key points of our response:

As the ESO sets out in its 2021 Future Energy Scenarios we see a role for blue hydrogen in supporting the investment case for the development of infrastructure that can later be used by green hydrogen. Our recommendation is that blue hydrogen should however prioritise use of Carbon Capture Utilisation and Storage technologies to reduce the carbon impact of expanding the use of blue hydrogen.
Scotland’s electricity resources, through offshore wind and other technologies will continue to exceed electricity demand between now and 2050.
The development of hydrogen from electrolysis could provide an opportunity to utilise this excess green electricity. Green hydrogen can support the electricity network by providing long duration storage and can serve as the source of green hydrogen for the decarbonisation of other sectors.
Increasing electricity demand within Scotland, through hydrogen electrolysis and other methods will help to reduce the requirement for further transmission network construction or reinforcement and/or reduce constraint costs, which will reduce the costs that are passed onto consumers.
Further work is needed to ensure that market and regulatory mechanisms are in place to incentivise the use of green hydrogen as a storage solution and to support the development of hydrogen electrolysers. With the right pricing mechanisms hydrogen projects could be paid to generate hydrogen for storage at times of high wind levels, which could provide greater savings to consumers than alternative methods for managing excess renewable levels.
There remains uncertainty over how hydrogen technology will develop in Scotland, as a result it is too early to state that it can be used to support decarbonisation over multiple sectors. Additional work is needed to assess if Scotland will be able to create enough hydrogen for its own network, or if it will need access to other parts of the Great British gas network, or other markets to support the use of hydrogen across multiple sectors.

Response to Consultation Questions

To what extent are the ambitions of the UK Hydrogen Strategy, published August 2021, adequate for Scotland?

The UK Hydrogen Strategy shows suitable ambition for hydrogen. The upper bounds of the Government’s forecast for hydrogen (20-35% of UK energy consumption in 2050) aligns with the most ambitious of the ESO’s Future Energy Scenarios, Leading the Way, which looks at the delivery of net-zero before 2050 for the UK [1].
We also welcome the Government’s acceptance of the Committee on Climate Change’s guidance in the sixth carbon budget that an initial twin-track approach is needed to understand the costs and infrastructure required to support blue and green hydrogen development.
As the ESO sets out in its 2021 Future Energy Scenarios we see a role for blue hydrogen in supporting the investment case for the development of infrastructure that can later be used by green hydrogen. Our recommendation is that blue hydrogen should however prioritise use of Carbon Capture Utilisation and Storage technologies to reduce the carbon impact of expanding the use of blue hydrogen.
With regards to Scotland specifically we believe the UK Government is right to say that there is a considerable opportunity to develop considerable levels of hydrogen by 2045.
Based on the latest Future Energy Scenario data and the recent outcome of the ScotWind offshore leasing round, Scotland can expect to have a significant excess renewable energy available (30-40GW generation by 2030 with around 32GW of offshore wind to meet 7-8GW demand in 2050).
The generation of green hydrogen from electrolysis will enable the use of this excess renewable energy and could potentially provide the basis for the use of hydrogen in other sectors, whilst also providing a secure storage fuel for use when renewables are unavailable.
The exact capacity of these electrolyser sites will depend on the development of electrolyser projects and their optimal siting on the network to support their use at times of high renewable output.

What should be the focus of UK Government investment to ensure that Scottish industry, supported by Scottish research, is able to become a world leader in green hydrogen for domestic use and export?

From an electricity networks perspective Scotland is well placed to take advantage of hydrogen from electrolysis to solve its domestic electricity challenges, potentially creating an exportable commodity as a by-product.
Based on current data from the ESO’s Future Energy Scenarios the likely electricity needs of Scotland as a whole will range between 5GW-6GW by 2030, with between 7GW-8GW needed by 2050 to meet decarbonisation needs for electricity, heat and transport.
Following the ScotWind leasing round announcement for 25GW of offshore wind, Scotland is now on track to support the delivery of significantly more offshore wind than the Scottish Government’s previous target of 11GW by 2030.
Hydrogen from electrolysis poses a potential solution to this disparity between generation and demand, alongside other long duration storage solutions, by absorbing excess electricity from offshore wind or other sources.
Hydrogen production would enable Scotland to access the terawatts of electricity capability associated with these wind turbines, whilst providing an alternative to building further transmission network infrastructure and would also help to reduce network constraint payments which are passed onto consumers.
The production of hydrogen from electrolysis is a credible option to unlocking the electricity capability of offshore wind turbines, as unlike existing storage mechanisms such as lithium-ion batteries or pumped hydro storage there are fewer physical limitations, as hydrogen could be produced for hours on end, allowing a greater amount of electricity to be stored than can be achieved through existing network storage solutions.

Which market mechanism should be used to incentivise investment in producing low-cost green hydrogen?

As stated above one of the areas where we see the production of hydrogen as a considerable boost for energy networks is in the electricity storage field.
The UK Government’s Long duration storage competition will form the basis for investment in this area, to establish the suitability of hydrogen electrolysis as a long-term storage solution.
Additional work should be undertaken to ensure that the correct regulatory and market mechanisms are in place to incentivise the production of hydrogen from electrolysis, for use as a storage/flexibility resource.

What infrastructure, and investment in infrastructure, is needed for green hydrogen to be easily available for heavy transport and buses across the whole of Scotland?

Based on our Future Energy Scenarios we know that to reach net-zero by 2045 in Scotland infrastructure needs to be developed to support the use of hydrogen in transport, however the extent to which hydrogen is used in heavy goods vehicles will depend on the maturity of hydrogen fuel cell technology compared to electric alternatives.
The use of hydrogen in transport will also be dependent on the whole system view for hydrogen across Scotland, as decisions in other sectors, such as electricity networks and heat decarbonisation will have a significant impact on the availability of hydrogen for both heavy goods vehicles and public transport.
For instance, whilst local gas distribution networks have been retrofitted over the last three decades to facilitate the use of plastic piping for domestic gas needs, the same process has not been undertaken at the national level transmission network, due to the higher costs and higher pressures used on this network.
Assuming Scotland’s gas distribution network was to be decarbonised to support the sole use of hydrogen, this would effectively isolate the gas grid in Scotland from the rest of Great Britain, unless the gas transmission network was decarbonised at the same time.
Access to hydrogen from the rest of Great Britain, may not be needed, as there is the potential for hydrogen electrolysis to produce enough hydrogen for Scotland’s various needs. However, depending on how hydrogen technologies develop, this infrastructure limitation would increase the hierarchy of use for hydrogen and require a more detailed assessment of the uses of hydrogen in Scotland. This could lead to hydrogen for transport to be deprioritised, in order to support the decarbonisation of other sectors.

March 2022